A novel hearing aid system based on advanced digital signal processing and radio transceiver technology will be developed. Three parallel developments prove feasibility; 1) an ear module which performs implication and digitization of the acoustic environment; 2) a bi-directional digital radio link between the ear module and a remote digital signal processing module; and 3) a remote module for advanced digital signal processing of the acoustic signal for high fidelity sound generation and customization to user hearing loss characteristics and surrounding acoustic environment. The breadboard electronics of the three main system functions will be integratable into a low-cost miniature production version in phase 2. The ear module includes a custom integrated circuit to demonstrate the integrity of the digitized acoustic signal and will utilize a unique delta-sigma circuit for high resolution analog-to-digital conversion and digital-to-analog conversion. The radio link will demonstrate the full functionality required in the ear module and remote module and will be characterized according to range, bit error rate, power consumption, producibility, and cost. The remote module will perform multiple simultaneous digital processing algorithms for enhancing the sound quality of the hearing aid system output, customizing the characteristics of the algorithm to the user's specific needs.